Spain urges prudence in comments on economy, reforms praised

11th April 2012, 0 comments

Spain urged its EU peers to be "prudent" when making comments about its economic woes on Wednesday following criticism from France and Italy, even as it got praise for its reforms from across the bloc.

"We all have our problems and we are working to find a solution to ours and also to help the eurozone. We expect that other countries should do the same, that they be prudent in their statements," Prime Minister Mariano Rajoy said.

Rajoy did not specify exactly to whom he was referring in his comments to lawmakers from his conservative Popular Party, saying only that he was talking about "statements made in the European Union on the part of certain leaders".

In recent days both French President Nicolas Sarkozy and Italian Prime Minister Mario Monti have made critical comments about Spain's handling of its debt crisis which have further fueled market fears over the country's finances.

Last month Monti said the EU was worried about "contagion" from Spain's debt crisis while last week Sarkozy warned French voters last week that they should re-elect him as president to pursue his cost-cutting plans or face the kind of debt crises that have gripped Spain and Greece.

Spain's bulging deficit, fragile banks as well as a slide into recession at a time of soaring unemployment, have sparked fresh concern on the markets about the sustainability of its rising debt that have caused yields on its bonds to rise steadily.

Higher yields make it more expensive for Spain to borrow and push the country towards a point where borrowing could become impossible.

But Rajoy said Wednesday that Spain will not need an international bailout from the EU and the International Monetary Fund like the ones given Greece, Ireland and Portugal.

"There are countries that are near ours which are in the situation which we all know. I want to say that this is not the case of Spain now and it will not be in the future," he said.

Rajoy's government has put in place a series of reforms aimed at reviving the economy, the eurozone's fourth-largest behind Germany, France and Italy, and rein in the public deficit since it took office in December.

Among the measures it has adopted is a reform of the labour code that makes it easier and less expensive to fire workers and a 2012 budget that includes 27 billion euros ($35 billion) in spending cuts and tax increases.

The government on Monday announced it intends to find efficiency savings of 10 billion euros a year in healthcare and education.

Both Germany and France praised Spain's reforms on Wednesday while European Central Bank executive board member Benoit Coeure said the rise in Spanish bond yields did not reflect Spain's economic fundamentals.

Speaking at a conference in Paris, he said he saw no reason why the situation in Spain would not normalise given the political will in Madrid to tackle the country's economic problems.

"We think Mariano Rajoy's government is carrying out a courageous and necessary structural reform project, which is of a nature to improve Spain's growth potential and lead to a turnaround," she added.

A German finance ministry spokesman said Berlin regretted that Spain's "enormous reform efforts" had not yet paid off on financial markets while a European Commission spokesman said the country does not need a bailout or outside financial help to recapitalise its banks.

Spain must reduce its deficit to 5.3 percent of gross domestic product this year and to the EU limit of 3.0 percent in 2013 from 8.5 percent last year.